There are three major types of donors and each one has their own motivations and tax incentives for giving.
If an individual likes you and wants to support your organization, he will give you a donation. Individual donors are traditionally: your family, friends, audience, people who embrace your cause and/or artistic vision. By giving you money to support you, they become your patron.
If you’re a charitable organization, you can issue tax receipts. Donations can be large or small, but keep in mind that no donation is ever too small.
Advantages for the arts organization: Building a network of contacts and support.
Advantages for the donor: Receiving a tax receipt. This represents a tax savings of 48.2% when the donor gives over $200 during the fiscal year. Example: if someone gives you a $200 donation, he will get a tax credit of $96.40 on his next tax return (Quebec and Canada combined). His donation will have cost him $103.60
How to proceed: Success is based on two factors: maintaining relationships and regularly updating your database. Are you ready to devote the necessary time and energy to these tasks?
Types of donations from individuals:
- Planned gifts
- Annual or spontaneous donations
- In memoriam donations
- Participation in benefit events
A corporation can choose to invest funds to support an artistic cause or vision, or share its goods and services.
Advantages for the arts organization: A company that has a community involvement policy provides money to support its vision. These amounts can be substantial and may lead to various forms of partnership.
Advantages for the donor-company: A company that makes a donation to a charitable organization (which issues tax receipts) can deduct that amount from its taxable income, up to a maximum of 75% of its net revenue. Discuss this with your tax specialist. Furthermore, any gift in cash, goods or services reflects positively on the donor-company, by reinforcing its image as a good corporate citizen.
How to proceed: There’s no point in writing to every CEO! Target the companies that are close to you, whether geographically (companies like to have an impact on the local community) or in terms of vision (RONA once supported a violin-maker by providing wood). Ask yourself the following questions: what does this company want to accomplish or communicate about itself, and how can my artistic organization help it achieve this? Tip: large companies often have a “Social Responsibility” section on their website, which describes their vision.
In addition, corporations use the following strategies to support a cause:
- Donations (cash)
- Sponsorships (cash, goods or services)
- Entertainment expenses (cultural subscriptions are tax deductible)
- Art acquisitions (fiscal depreciation when the work is exhibited in the place of business)
A private foundation is constituted of funds from an individual, family or limited group of persons. The assets under management are often quite large and only the portion of interest generated during the year is redistributed to various causes. Private foundations are obliged, under the law that constitutes them, to redistribute the money to charities duly registered with the Canada Revenue Agency.
A public foundation has a mandate to collect funds from various sources to support a specific mission. For example, the Fondation du Théâtre du Nouveau Monde’s mandate is to collect funds to be managed by the foundation and redistributed to the TNM. Since the foundation is a separate entity, it’s administered separately from the organization and has a certain freedom in deciding how to give back to the TNM. There are also community foundations, like the Foundation of Greater Montreal, which distributes the funds it collects to charity organizations that meet its granting criteria.
N.B.: the creation of a public foundation to support a group’s fundraising activities requires a strong organizational structure. That’s why, in general, only artistic companies with large budgets are able to create their own foundations.
Advantages for the arts organization: Benefitting from the support of foundations (sometimes quite large) whose mission is precisely to support organizations such as yours.
Advantages for the foundation: The very mandate of a foundation is to give back to charitable organizations; therefore, enabling it to accomplish its mission is the main advantage. Of course, the fiscal advantage occurs when the money is given to a foundation – that’s when the tax benefit is calculated and not when it’s donated to a charitable organization.
How to proceed: private foundations are not always found on the Internet. There are, however, guides and online tools to help you identify them. You can also consult the guides published by the Centre québécois en philanthropie, found in libraries.